Petropavlovsk Plc, the Russian
company considering selling shares in its iron ore business in
Hong Kong, plans to sell all production of the steelmaking
material to China.

The iron ore mines’ proximity to the Chinese border and
increasing demand for steel there make it the natural market for
the commodity, Jay Hambro, the chief investment officer of the
London-based company that’s also Russia’s third-largest gold
producer, said today in an interview in Hong Kong.

Petropavlovsk is developing the Russian iron ore assets it
acquired in April 2009 with the 294.5 million pound ($425
million) purchase of Aricom Plc. The company said in a statement
earlier this week it’s still considering listing the division in
Hong Kong. Petropavlovsk is also mulling whether to find an
investment partner as an alternative method to develop the
business, Hambro said today.

Production at the Kuranakh iron ore mine in Russia’s far
east will resume next month, Hambro said. The pit will produce
about 900,000 metric tons a year and all the output will be
taken by the Jianlong Iron & Steel Group.

The London-listed miner agreed in March to a loan of about
$400 million from Industrial & Commercial Bank of China to fund
the first stage of its K&S iron ore project in Russia’s Amur
region. The mine, about 40 miles from the Chinese border, will
produce 3.2 million metric tons of iron-ore concentrate a year
starting in 2013. The company plans to build a third mine at its
Garinskoye deposit.

The Asia Resources Fund in Hong Kong will invest $60
million in the company’s iron ore operation, valuing the unit at
$860 million, Petropavlovsk said earlier this week.

Petropavlovsk posted a more than six-fold increase in
profit last year on increased output and higher gold prices. Net
income rose to $143.2 million from $22 million in 2008. It
produced 486,800 ounces of gold last year and is targeting
annual output of more than 1 million ounces in 2013.

OAO Polyus Gold is Russia’s largest producer of the
precious metal and OAO Severstal the second-biggest.